Measured by the slope of an indifference curve steep

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Unformatted text preview: ence curves have a high MRS. indifference curves have a low MRS. diminishing marginal rate of substitution As consumption increases, the MRS decreases. Pop (six-packs per month) Marginal Rate of Substitution 10 8 MRS = 2 6 c 4 MRS = 1/2 2 g I1 0 2 4 6 8 10 Movies (per month) Pop (cans) Degree of Substitutability Degree Bowl shape indicates willingness to substitute one good for the other the 10 8 Ordinary goods 6 4 2 0 2 4 6 8 10 10 Movies Movies Marker pens at the local supermarket Degree of Substitutability Goods are perfect substitutes Goods when all that matters is the level of consumption of both goods taken together. taken 10 8 6 Perfect substitutes 4 2 0 2 4 6 8 10 10 Marker pens at the campus bookstore Left running shoe...
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